Can I Borrow Against My Structured Settlement?
Many are looking into loans when the need for a large amount of money arises and using the structured settlement as collateral seems a more attractive option since it allows them to use their structured settlement now but still own it once the loan is paid. Yes you can actually borrow against a structured settlement but financial institutions usually do not acknowledge structured settlements as collateral.
There are two basic kinds of loans. The first kind of loan, and also the most common, is collateralized and the other is not. Under the collateralized loan, financial institutions require that you provide them with you possession that has the same known value as the value of the amount you are borrowing. That collateral is the financial institutions’ guarantee that just in case you are unable to pay, they can take your possession. You can post anything of value as collateral. It could be a painting, your house, or a car. Since a structured settlement is a federally sanctioned annuity payment, it can be used as collateral
The non-collateralized loan is also known as the personal loan or signature loan. It is taken on the faith and good credit of your name. This is usually only obtained when you have established your good credit record.
However, there are two major points that discourages financial institutions from accepting structured settlement as collateral.
One is that the court require proceedings should the owner of the structured settlement decide to transfer the rights of the structured settlement to someone else. When you present your structured settlement as a collateral, you will then have to ask the court to approve it. That means the financial institutions will go through more proceedings and incur more costs. These costs will be deducted from you. Since the court requires that the final amount the structured settlement owner will receive be presented to them, they will most likely feel it is not fair for the owner to be paying so many fees.
The next consideration is the actual terms of your structured settlement. The manner and time how you receive your structured settlement fund has been set before the structured settlement take effect. if you are set to receive your money once a year and the lender wants to receive his monthly, that will be a problem.
Many people actually advise that you just sell your structured settlement instead of using it as a collateral. How you choose to do it really depends on the discount rates you will get.
- How Are Structured Settlement Transfers Priced?
- Why Is Your Structured Settlement Discount Rate So Low?
- Role of the Structured Settlement Broker
- State Structured Settlement Protection Act
- How The Law Protects Sellers of Structured Settlement Payments